Last Friday the Department of Labor released the employment report for November. 227,000 jobs were created yet the unemployment rate ticked up to 4.2%. JP Morgan, one of the Portfolio Strategists we utilize for client accounts, commented on the US labor market in their Weekly Market Recap on Monday…
The U.S. labor market, while having cooled from its red-hot state, has settled into a relatively healthy position. Following a month of hiring disruptions due to hurricanes and strikes, businesses added 227,000 jobs in November. However, the uneven nature of recent job growth has led many to question the true health of the labor market.
2024 employment growth has been concentrated in a few key sectors, primarily health care and government, which have contributed 41% and 21% of this year’s job gains, respectively. Health care’s hiring dominance seems less concerning as the sector is still addressing pandemic related backlogs. However, employment growth dominated by the public sector, which tends to see increased hiring
later in the economic cycle, may be viewed as a warning sign. That said, there are important nuances to consider. Keeping in mind that government employment currently accounts for 14.7% of total payrolls, its 21% share of total job growth, 90% of which has come at the state and local level, appears less troublesome. Moreover, the sector’s share of payrolls remains below its pre-pandemic (2014 – 2019)
average of 15.3%, suggesting its recent outsized growth reflects the continued uneven normalization of the labor market post-pandemic. Outside of these two sectors, sluggish manufacturing activity has been a headwind. Still, some cyclical sectors, including construction, leisure and transportation have seen solid job gains this year.
Despite data volatility, recent employment conditions and positive real wage gains have supported a resilient consumer and U.S. economy. With job openings back near pre-pandemic levels, this isn’t a labor market that is likely to boom, but it shouldn’t bust either. Steady economic growth and solid corporate profits should support a moderate pace of hiring in the year ahead.
